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High Net Worth Individuals face a range of new challenges as they seek to protect their assets. Whilst the dramatic events of the Roy family may seem remote for many of us, it could still be important to consider the benefits of asset protection strategies.
Generally, we find that the overall desire of our clients to protect their wealth from threats and to ensure that they bequeath it to the next generation in a way that works for them and their children.
As a result of the ever evolving social and economic climates, the risks to the family assets have also increased and, today wealthy individuals are asking more of their asset protection strategies than they were just a decade ago.
We’re seeing, for example, increased instances of multiple marriages, among both wealthy individuals and their children and heirs. It’s often thought that trusts can provide complete protection here but this isn’t always the case.
When it comes to asset protection, the Supreme Court decision in Radmacher v Granatino in 2010 was a game changer for asset protection. This ruling has enabled parties to contract out of the powers of the English courts in order to ring-fence pre-acquired or inherited assets from claims on divorce and to secure significant departures from equality.
Once regarded as something of an American import, nuptial agreements now carry significant weight and have become an essential part of wealth protection for HNWIs in this jurisdiction over the last decade. The truth is that although trusts certainly continue to have their uses, wealthy individuals need to think about prenuptial and postnuptial agreements, both for themselves and their children.
We’re also talking to more families about adopting corporate structures such as family investment companies or family offices in order to develop better protection and flexibility for their assets.
Alongside this, a very important trend that we’re seeing at the moment is that people are making their money considerably earlier in their careers, perhaps because they work in tech or they’ve sold their business. The risk here is that they don’t start to think about asset protection until it’s too late. As a result, they end up paying more tax than they should, and they can’t develop a proper strategy for preserving and managing their assets and ensuring that those assets benefit their children.
Asset protection is not just about laws and regulations, increasingly important is education and developing more positive attitudes towards wealth. As a result, HNWIs want to educate their children about their inheritance so that can use it wisely rather than spending it foolishly.
There’s another important new development that HNWIs need to consider these days. Social perceptions of wealth, especially when inherited, are increasingly important. The Pandora Papers, hostility towards oligarchs and the controversy over the tax status of Rishi’s Sunak’s wife vividly demonstrate the point. Similarly, if you’re transferring large sums to your children, you probably don’t want to see them boasting about their affluent lifestyle on their Instagram accounts.
We’re increasingly advising clients on how wealth preservation can be perceived as well as how it can be achieved. HNWIs are asking us to advise them on issues such as social investing and backing projects that are connected with the sustainability and ESG agenda.
Today, preserving the good name of a family is almost as important as preserving its wealth.
As part of this trend, wealthy individuals are looking for a comprehensive package from their asset protection advisors, a package that covers a number of different areas, including reputation management, immigration, real estate and employment. Successful asset protection these days is likely to include the need for corporate and commercial expertise as well.
As the asset protection landscape undergoes so many changes with new risks emerging all the time, it’s more important than ever that HNWIs act now. The aim is to create a framework that allows for control with flexibility so that wealthy individuals are not just preserving their assets, but they’re building on them to create a better future.
The key to achieving this, as our clients are finding, is to take a holistic, multi- faceted approach to asset protection and wealth management with an experienced, full service legal advisor.
This article was first published by Thought Leaders 4 | Private Client Magazine on 26/08/22.
FURTHER INFORMATION
If you would like any further information or advice about the topic discussed in this blog, please contact Laura Harper or our Private Client team.
ABOUT THE AUTHOR
Laura Harper is a partner in the Private Client team. She advises both UK resident and non-UK resident/domiciled individuals, families and trustees on a wide variety of UK tax, trust law and international estate planning issues, including the planning to be undertaken when moving to or from the UK. She also has extensive experience working on cross-border matters and structuring involving family-owned businesses.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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